Malaysian Steel Companies Post Weak Earnings; Actual Situation May Be Worse Than Headline Figures Suggest

According to an analysis published by Simply Wall St on June 4, Malaysia Steel Works (KL) Bhd (MASTEEL)—a major Malaysian long-steel producer—reported weak financial results, yet the market reaction remained relatively muted. HCT590X+ZM Hot dip Zinc-magnesium alloy coating (ZM) steel , However, the analysis highlights underlying issues suggesting that the company's actual profitability may be weaker than the headline figures imply.

The analysis suggests that when evaluating the quality of corporate earnings, investors should look beyond net income and pay closer attention to changes in earnings per share (EPS). Over the past 12 months, MASTEEL increased its outstanding share count by 7.8% through a new share issuance. While this move facilitated fundraising, it also spread the company's profits across a larger number of shares, thereby diluting shareholder returns.

Data shows that the company's net profit grew at an average annual rate of approximately 40% over the past three years, indicating a positive long-term growth trend. HCT590X+ZM Hot dip Zinc-magnesium alloy coating (ZM) steel , However, in the most recent fiscal year, net profit fell by 36% year-over-year, while earnings per share (EPS) dropped by 37%—a slightly steeper decline than that of net profit—reflecting the negative impact of additional share issuance on shareholder returns.

Analysts point out that if a company's net profit rises without a corresponding increase in EPS, it indicates that the additional profit has not been effectively converted into shareholder value. Consequently, from a long-term investment perspective, EPS is generally a better indicator of a company's true profitability and potential for share price appreciation than net profit alone.

However, the report also notes that despite facing performance pressure over the past year, MASTEEL achieved a cumulative EPS growth of approximately 32% over the last three years, indicating that the company has not entirely lost its long-term profitability. HCT590X+ZM Hot dip Zinc-magnesium alloy coating (ZM) steel , Future earnings prospects should be assessed by comprehensively considering factors such as profit margins, the balance sheet, return on investment, and the industry environment.